Prime Minister Manmohan Singh on Saturday said the country will have to live with economic woes through the next fiscal because the government policy measures cannot fully insulate the domestic economy from the impact of the global downturn.
However, the easing of inflation has given monetary flexibility to deal with the difficult economic environment, the prime minister said.
"Growth in the current year will be lower than the last year ... Our problems will not be over in the current year. The difficult period will continue into 2009-10," Singh said at the Economic Times Awards function in Mumbai.
He said the government would have to continue with the supporting environment next year as well.
"Both monetary and fiscal policy will have to be tailored to that objective... Fortunately the rate of inflation has eased considerably. Inflation is now 5.2 per cent and is expected to decline further. This gives ample flexibility for monetary policy." However, the Prime Minister said that the government has limited space for providing more tax cuts in the wake of the growing fiscal deficit even though it (the government) has to "tolerate" it for the next year to accommodate the expenditure needed for stimulating the economy.
The prime minister said GDP growth estimates for the current fiscal vary between 6.5 and 7 per cent. The brunt of the recession in several parts of the world is being felt in areas that had seen rapid growth earlier.
The government and the Reserve Bank have announced measures including cuts in interest rates and across-the-board reduction in excise duty to boost demand. Besides, exporters and small-scale industries have been given packages -- fiscal and monetary.